Integrating decentralized finance mechanisms with DAOs: decentralized exchanges between liquidity and autonomous governance

Claude Humbel

Chapter 17 in Decentralized Autonomous Organizations in the Legal Landscape, 2025, pp 328-346 from Edward Elgar Publishing

Abstract: Decentralized Exchanges (DEXs) are among the most compelling innovations in the DeFi space. Unlike traditional and centralized exchanges, a DEX allows buyers and sellers to interact directly and exchange their digital assets without having to trust an intermediary or each other. This chapter first discusses how DEXs work and their various liquidity provision and pricing mechanisms, as well as their benefits and pitfalls. It then explores the relationship between liquidity supply and concentrated governance token holdings, which could potentially undermine the decentralization of platform governance and prevent the emergence and existence of truly decentralized autonomous governance. Finally, it briefly discusses possible policy implications that arise from the interaction between liquidity provision, governance, and decentralization.

Keywords: Decentralized Exchange (DEX); Decentralized Finance (DeFi); Automated Market Maker (AMM); Liquidity Provider; Liquidity Pool; Autonomous Governance (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035341610
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